Correlation Between Value Fund and Meridian Trarian

Can any of the company-specific risk be diversified away by investing in both Value Fund and Meridian Trarian at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Value Fund and Meridian Trarian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Value Fund Value and Meridian Trarian Fund, you can compare the effects of market volatilities on Value Fund and Meridian Trarian and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Value Fund with a short position of Meridian Trarian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Meridian Trarian.

Diversification Opportunities for Value Fund and Meridian Trarian

0.87

Correlation Coefficient

Value Fund  Meridian Trarian

Very poor diversification

The 3 months correlation between Value and Meridian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Meridian Trarian Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Trarian and Value Fund is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Value Fund Value are associated (or correlated) with Meridian Trarian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Trarian has no effect on the direction of Value Fund i.e., Value Fund and Meridian Trarian go up and down completely randomly.

Pair Corralation between Value Fund and Meridian Trarian

Assuming the 90 days horizon Value Fund Value is expected to generate 0.74 times more return on investment than Meridian Trarian. However, Value Fund Value is 1.34 times less risky than Meridian Trarian. It trades about -0.07 of its potential returns per unit of risk. Meridian Trarian Fund is currently generating about -0.07 per unit of risk. If you would invest  5,264  in Value Fund Value on December 29, 2024 and sell it today you would lose (226.00) from holding Value Fund Value or give up 4.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Value Fund Value  vs.  Meridian Trarian Fund

Value Fund Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value Fund Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Meridian Trarian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meridian Trarian Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Meridian Trarian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Fund and Meridian Trarian

The main advantage of trading using opposite Value Fund and Meridian Trarian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Meridian Trarian can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Meridian Trarian will offset losses from the drop in Meridian Trarian's long position.

The idea behind Value Fund Value and Meridian Trarian Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.